Renters Insurance: Peace of Mind for Ten Bucks a Month

On 02 August 2005, my friend Frank and his partner awoke at 2:45 a.m. to the dog barking and a neighbor knocking on their door. The apartment complex was on fire. They grabbed their dog and whatever they could carry and ran from the building.

“We lost everything,” he says. Later they’d find out that it was arson. A former employee of the apartment complex stole rent checks and set the office on fire. Frank was moving into a new apartment in ten days, and the new complex agreed to let them move in early. “We moved in with a plastic bag of groceries, paid for with a $50 food voucher from the Red Cross,” he says. The other 70 displaced tenants stayed in Red Cross shelters.

To make matters worse, Frank didn’t have renters insurance. “We didn’t think we’d ever need it,” he says. “You don’t see why you should pay this extra bill until you’re in a situation where you need it.” They had to start over from scratch.

Why renters skip the insurance
There are any number of reasons renters don’t think insurance is a necessary expense. I myself didn’t have a policy until Frank’s situation motivated me to get one. Common reasons renters forgo an insurance policy include the following:

“What are the odds anything will happen?” The odds are not in your favor. The Bureau of Justice Statistics reports that renters are 50 percent more likely to be burglarized than homeowners.

“My landlord has insurance.” That means that your landlord (or condo association) has their valuables — the building — protected. Your belongings are not covered.

“I can’t afford renters insurance.” Many people are willing to spend a couple hundred dollars on clothes, but won’t spend the cash to protect themselves from the risk of losing everything they own. It’s possible to find a policy for $10-12 per month, though your premium will depend on location, the deductible, the insurance company, and coverage needs.

There are ways to lower the cost of coverage, including raising your deductible (make sure you can afford it, though) and having protective devices such as smoke detectors, extinguishers, and security alarms. Some insurance companies offer discounts to senior citizens. Also look for a multi-line discount, which is a discount for buying more than one type of policy from the same company (e.g., renters insurance and auto insurance).

I suspect that the main reason most people don’t have a policy, though, is that they don’t understand how renters insurance works, or why they need it.

Renters insurance 101
Renters need a HO-4 policy. Condominium owners need a HO-6 policy. Both will cover personal property loss from “named perils,” which is insurance-speak for what you’re insured against. Your policy will likely include the following named perils:

Fire and lightning

Windstorm and hail

Smoke

Vandalism and malicious mischief

Theft

Accidental discharge of water

Other named perils covered sound like scenes from Die Hard (explosion, riot, damage caused by air crafts and falling objects), but I suppose you never know when German radical activists might terrorize your Christmas party.

Renters insurance also includes liability protection, which covers medical expenses for a person injured on your property and legal defense, if necessary. Additionally, if your apartment or condo becomes uninhabitable due to a named peril, your coverage will pay for somewhere to live in the meantime.

What is not covered: If you live an an area prone to floods, earthquakes, or hurricanes, you may need to purchase a rider, or separate policy. Also, if you have valuables that would exceed your policy limit, such as expensive jewelry or antiques, you’ll need a rider to recover the full loss.

Take inventory. This seems to be the step that most of us dread, but it’s where we should start. (Confession: I haven’t done it yet. It’s been languishing on my to-do list for almost a year now, but I’m going to make it a top priority.) If you lost everything, it’d be awful to have to recall every item you owned and it’s value. Better to document it. Here’s the plan of action:

Photograph or videotape each room.

List the value and serial and model number of items.

Attach receipts, if you have them.

Save the list and the photos or video to a DVD, and make at least three copies. Keep one copy in a fireproof place, one at an off-site location (could be a parent’s house or a safe-deposit box), and send one to your insurer.

There also are software programs that walk you through the process. The Insurance Information Institute provides free inventory software that helps you complete a room-by-room inventory.

Prepare. Write down a set of questions you want to ask your potential insurance providers. Some suggestions include:

Do you have brochures or any information you can send me in the mail? (Keep the ones from insurers that appear to be a good fit and use them to compare each provider’s policies.)

What could cause my rates to increase?

What discounts do you offer?

Does the liability insurance cover legal defense and medical expenses?

Do you pay actual cash value (ACV) or replacement cost coverage? (ACV coverage pays what your property was worth at the time it was destroyed or stolen, minus the deductible. Replacement cost coverage pays what it will cost to replace the items, minus the deductible. It costs more in premiums, but pays more if you file a claim.)

Do you offer separate policies for roommates? (Alternatively, talk to your roommate about splitting the cost of a policy.)

Shop around. To find the right provider and policy, consider the following:

Search “renters insurance” online. Most providers have Web sites that give you a free quote.

Ask friends and neighbors which company they use, and if they are happy with their experience.

Updating your policy
Renters insurance is like many other forms of insurance – not fun to think about. But it isn’t a Ron Popeil rotisserie — don’t set it and forget it. Stay in touch with your agent to make sure you’re getting the best deal and taking advantage of new options or discounts. Also, be sure to contact her if your living situation changes, as in the following situations:

You moved. Each residence requires a unique policy.

You got a roommate: human or furball. You’ll need to decide on a separate or shared policy for the former. Make sure the latter is listed in your liability coverage.

You bought an expensive bauble or a pricey new toy. You need to have it listed in your policy, or you might need a separate rider to cover it.

It’s easier than you might think to find an affordable renters policy with good coverage, and it’s time and money well-spent. As my friend Frank says, “It’s the cheapest bill you’ll have. For very little money, we could have replaced everything we lost.”

If you are a renter, do you have renters insurance? If not, is there a reason you don’t have it?

If students are saying “I can’t afford $14 a month to get insurance” then I guarantee they definitely cannot afford thousands and thousands of dollars to buy even the most basic things you need to live your every day life.

Some people are doing it really tough financially but I think a lot of the people who say “I can’t afford it” could skip one night at a bar in a month, a couple of coffees, and then you’ve got coverage

Yes – you need renters or condo insurance. I’ll through one monkey wrench into the mix as I don’t think I saw it in the posts above.

If you have a “home office”, I do, and my home office equipment is not covered under my condo policy. I do need (and have) a extra business policy to cover equipment and such.

Also – whether it is renters or condo or business – verify the amount of coverage for your computer and related equipment and the time /effort to get and restore your computer back to where it was before the event.

Insurance companies make money. Lots of it. The same way casinos do: paying out less than they take in.

That means that probabilistically, you will lose money by purchasing any type of insurance. It’s the same as gambling, or getting the “extra warranty” on your TV.

The only situations where insurance makes sense are those where the potential loss is catastrophic – destroys you (or others). Life insurance and automobile liability insurance are pretty good ideas (and legally required, for the latter).

Having your “stuff” burn to the ground will generally not ruin your whole life, incapacitate you, destroy your earning potential, or make you go bankrupt. So take the chance. Odds are you come out ahead. Odds are you realize that you had too much crap anyways.

“What if” reasoning is for the fools wasting their money on lottery tickets. But if the risk is going to keep you up at night – by all means buy the insurance for the sake of your mental health. Life is full of unavoidable risk though.

Personally, as a renter, I have never had and am not planning on ever having renter’s insurance. Nothing bad has happened to me, and most likely never will – and I’m so glad I never wasted my money.

i don’t have renter’s insurance and i am sure that the landlord doesn’t either so we are treading on thin ice, me and my neighbors. the reason is as stated above; we cannot afford it and even if we can we wouldn’t get the insurance because it feels that there are better things that can be done with the hard to come by cash than to give it away

I own a condo and never realized I needed HO-6. In fact, when I switched from renting to owning, I specifically asked my insurer if I had to change anything, and they said “no.” I emailed today, asking about HO-4 vs HO-6 and they replied “oh yes, you must have HO-6 if you own the condo.” !!

Thanks for including this information. I’ve lived in this condo for two years! I’ll be clearing this up ASAP.

My apartment complex had a fire two years ago, too.
I was a lot luckier: the firemen put the fire out early on. It had started on the ground floor, and as I lived on the top floor, my apartment had no damage. My floor was a bit burnt from the fire climbing up the garbage chute (it started in the garbage room. Someone probably threw a lit cigarette or something), but the apartment was intact.
And since we were home, the firemen didn’t smash our door open like they did for other apartements.

We were out of phone and electricity for a few days, and out of an elevator for a week (and we lived on the 8th floor). But nobody was hurt. Our possessions weren’t damaged.

I already had renter’s insurance at the time, but it was definitely a good reason to keep it. Things do happen. Sometimes you’re lucky even when they do happen, but better not to count on it.

Always wise to get rental insurance, but I would advise as a landlord that landlords also get adequate insurance.

My friend was insuring his home as though he lived there, but after a big leak it emerged that he was renting it out and the insurance company did not pay for the repairs. A very espensive way to try and save a hundred or so extra pounds he would have been charged had he been honest about renting out the house.

I’ve been reading for a year now, and while I’ve learned so many great things, this is the FIRST time I’ve done what JD’s recommended within five minutes of reading. I’ve been renting for 5 years now, but only as of today do I have renter’s insurane. I’m in the AmeriCorps service program right now, so my budget’s limited, but $80 for the year? Why wouldn’t you?

I think what has been missing in this discussion is a link to the broader issue of disaster planning. If you are prepared to evacuate quickly, for whatever reason, you will be more prepared to evacuate quickly for a fire or other localized disaster. If you can’t rough it for a few days, then what are you going to do when there’s a regional disaster?

@Kat (#84): Yes, I realize there must be some nice thrift stores out there. I have seen a few (and I know there are lots of nice ‘vintage’ clothes stores too). I didn’t mean to imply that thrift stores only sell crap, though. I guess I was just trying to visualize the disaster and no $$$ scenario, and I was focusing more on going out of my comfort zone (wearing used stuff) IF I was in the situation of no insurance, and that seems pretty scary to me. But yeah, I was thinking more along the cheap thrift store lines than better ones. I just don’t like the idea of wearing used clothes. A couple of good thrift stores I’ve been to had designer things for sale for the price of new items in better condition… I was not impressed.

I don’t really dress like everyone else… I guess my style isn’t anything way out there, but I try to be faily unique. I also shop sales a lot – try not to just throw money away blindly (or spend a lot) unless I know it’s a brand I love, but that’s a different topic altogether.

@ebyt (#111): So you just don’t like the idea of wearing used clothes? That’s interesting. It’s never weirded me out, but I guess I grew up wearing hand-me-downs from cousins and such, so that could be why? Of course I wash everything before wearing it, and I’m not talking about underwear or anything like that, but clothing just doesn’t seem that personal to me. Lots of the clothing people donate seems to have been used very lightly, if at all. (They bought it and it didn’t fit? It was a gift? They just never wore it? That’s usually why *my* clothing migrates from my closet to the thrift store…)

I prefer used books to new ones, too. Maybe it’s something about items with history.

P.S. — I didn’t mean to insult your sense of style! I think it’s *harder* to avoid dressing like everyone else if you have fewer choices, but still possible. (I’ve found things I liked on the sale racks at dept. stores, too.) What I meant to say is, thrift stores generally have more unique items, because everything on the racks is different, whereas new clothing stores have one whole rack of the same pair of pants, and another whole rack of the same top, so the total number of things to select from is smaller. Of course, it sucks when you find the perfect item at a thrift store and then realize it’s not the right size, but I love having more to choose from (and the thrill of never knowing exactly what I’ll find).

@kat: No problem. I knew the way I worded my initial comment would get some sort of response, but I see now that I should have thought it thru a little better. I don’t by any means look down on people who go to thrift stores. I think it’s smart, but I think you nailed it – clothing is more personal to me than it is to you. Just something about it being worn creeps me out. But yes, I imagine there would be some lightly used items. And I have donated some lightly used items to Goodwill (does it exist in the US? I’m in Canada)… never really thought of it that way, that I’d be wearing clothes where others did the same lol. I never got hand me downs as a kid, so maybe that is part of it.

I’ve bought used books and other things – I don’t have a problem with that.

I have renters insurance and because I get it from the same company that I get my car insurance through it ends up being free. ($10/month with $10/month taken off my car policy)

I recently used it when a pipe burst and 95% of my home was completely soaked with water. My landlord’s insurance paid for the repair of the house, but it was my renters insurance that covered the majority of the temporary living conditions and replacing $3,000 worth of damaged personal property.

I highly recommend anybody out there renting to pick up some sort of policy.

We’ve always had (high-deductible) renter’s insurance. It would be crazy not to–not because of our possessions, but in the event of natural disaster or liability.

We live in earthquake country, and if we’re here when the big one finally comes, I’d rather be the family with money to pay for temporary housing than one of the thousands of people who didn’t think they needed insurance and can’t even find a couch to crash on because half the buildings in town are rubble. That earthquake rider costs as much as the entire basic policy, but oh well. Goodness knows how much property owners will be able to charge in that scenario. A lot. But my kids won’t be sleeping in the street.

Other people have mentioned the liability question, but what brought it home to me was actually a car accident. We were parked when two cars hit each other and crashed into our car (fortunately we weren’t in it). No one would step up to pay the damages while their insurance companies were battling out who was at fault. When we finally thought to call our insurance company, they made sure we were paid immediately. That’s how I learned that the insurance company’s lawyers are always going to be better than someone I can hire to defend me in a liability claim.

The only situations where insurance makes sense are those where the potential loss is catastrophic – destroys you (or others). Life insurance and automobile liability insurance are pretty good ideas (and legally required, for the latter).

Having your “stuff” burn to the ground will generally not ruin your whole life, incapacitate you, destroy your earning potential, or make you go bankrupt. Personally, as a renter, I have never had and am not planning on ever having renter’s insurance. Nothing bad has happened to me, and most likely never will – and I’m so glad I never wasted my money.

>>

JD, I could not disagree with you more!

You are arguing two flawed things – 1) That people only insure against the worst tragedies 2) That it’s all about probability.

Re: 1)

If I had a fire, without insurance, I not be made bankrupt but it would cost me a lot of money to replace my life. I don’t have a lot of “stuff”, but I like my life and after a traumatic fire I would actually like to return to it quickly and easily, not build my way up again for the next few years. I carry insurance for that reason as well as against total distaster.

People mentioned students losing all their college books. This might mean you have to defer college for a year because you can’t afford to replace your books and clothes until next year. Is $10 bucks a month worth it to you to not have to do this? Then get insurance.

Re: 2)

As I commented above, a lot of people are mixing up risk and probability in these equations, when these are not the same things. JD: so are you.

People need to consider their case for/against insurance based on RISK, not probability. Of course these events are low probality, but these may not be low risk. A single event (say a house fire) can have more than one consequence, and therefore more than one risk you should consider.

Risk associated with event = probability of event occuring AND consequence of event.

Risk associated with house fire = probability of house fire occuring AND that it ruin your whole life due to bankruptsy = LOW RISK

But risk associated with house fire ALSO= probability of house fire occuring AND I am severely financially crippled for next two years before I replace everything I need and life returns to normal = NOT AS LOW RISK

Yes, insurance companies make money. They are not charities. They do the same thing WE should do – they do a proper consideration of risk. They offer you “relatively” low premiums vs payout based on the risk that you will actually make a claim on the policy. They then spread this risk across thousands of customers. If you make a claim, it’s balanced out by those that do not.

By all means people should assess what different risks they face and maybe decide the risk is low and therefore not carry insurance.

But, please PLEASE do not argue against insurance based on probality and the idea that “it has never happened to me and therefore it’s unlikely ever to happen”. This is really poor advice (not to mention bad math).

Thanks for the reminder – this is something that has been on my to do list since I first moved out of my parent splace (5 years ago). I always figure I don’t really own anythign of great worth but just sittign here now and adding things up in my head I am up to $30k and that is just major pieces of furtniture an delectrical appliances.

I have tried to get coverage in the past but came upon this problem…

I wanted coeverage for $50,000. I also wanted to specify a seperate amount for my engagement ring ($18,000). Each insurance company declined to insure me (admittedly I was just getting automatic online quotes – I never spoke to a “real” person) because the ratio between my policy and the additional specified amount was too low. I either had to over-insure my property or under insure my ring. To be honest everything I own is replaceable (tvs, lounges, etc) except my engagement ring (huge sentimental value and it is very unique) so I was really torn.

I will make it my misison this weekend to get renters insurance and atually speak to someone abotu my conundrum. Thanks for the reminder!

“My insurance company would not insure my same-sex roommate on the same policy, but when I moved in with my boyfriend, I was able to add him. Their explanation was that they cover “domestic partnerships” but not roommate situations.”

“I wonder how much longer that will hold up.”

@Tyler (no. 14): This person wasn’t saying same-sex domestic partnerships aren’t covered — just that roommate situations aren’t covered. It really doesn’t strike me as a problem that random “roommates” are not covered on one’s policy, whereas a domestic partner would be. Frequently, roommate situations are transient, and they could be people you don’t even know much about, etc. I’ve had plenty of roommates over the years who I wouldn’t want to insure! This doesn’t strike me as a particularly egregious practice.

Where are people getting 10 bucks a month for renters? In Portland the cheapest I’ve seen is $17. Also I’ve gone 10+ years without it. I don’t understand why I should get it now? How often does this stuff really happen. Not knocking it just don’t get it though.

My roommate and I split a $14.00 per month policy. It’s required, but I’d get it even if it weren’t. I’m a student, and don’t have a lot, but I would have a hard time replacing things if something happened. Even clothes, household items, a few cheap electronics, text books, a couple of instruments and hand-me-down furniture add up more than you’d think. $7.00 isn’t too hard to fit in the budget. I haven’t yet done an inventory, but you’ve inspired me to get on it today.

I’ve had renter’s for years & have never used it, so some could argue it’s been a waste of my money. However, living in complexes or houses with multiple units, I’d rather pay the insurance than always rely on my neighbors’ ability to watch a pot on the stove, or not to overload a circuit, or to remember the tub is running, or to have trustworthy friends or family members coming to visit. Renter’s insurance, just like auto insurance, is there to protect your interests when others have no such concern. And of course there are the risks from gas/power line failures, etc.

@ neglectarino. I agree. You just never know when the forces of stupid physics will work against your apartment. And, should your emergency fund really pay for somebody else’s negligence or ill-will against your apartment if you can avoid it at a reasonable cost?

I do not have renter’s insurance, but after reading the post and comments here, am somewhat perplexed that anyone could debate whether a $10/month renter’s insurance policy – that may include liaibility coverage – is worth it. I also live in New York City. In my building, we have had fire trucks come out to our building too often than I care to think about. Why? People are careless. I cannot babysit my 20-ish neighbors and tell them that while their EVOO is heating on maximum power on their nice le Creuset saucepans, unattended, they shouldn’t engage in phone calls or lengthy e-mails or cellphone text dramas. Come to think of it, my 40-ish neighbors right next door often have their front door open because yet another kitchen “accident” has happened (luckily for us, we have a fire escape right next to my street-side window and a hyper dog with a very loud bark in case the next kitchen “accident” gets really out of hand; the downside to the fire escape is the potential for break-in & burglary).

A few summers ago during a heatwave, we lost power for several days (this was much reported in the news). A “force majeure” event. Everything in my fridge spoiled. I had no insurance to replace my groceries or have a hotel stay to survive the power outage days with A/C, reimbursed to me.

Thanks to this GRS post, and because it’s been in the back of my mind for a while, I filled out an online query form for renter’s insurance. I live in a litigious part of the country, so I requested liability coverage, too. It looks like we’ll pay $18.50/month (I will be able to confirm this when we actually sign the contract).

We have rental insurance (through Travelers) and it is really affordable. While neither my husband or I really have anything too valuable, it is comforting to know that we have something to fall back on if need be. The things that would be the worst to lose are those items that are irreplaceable (pictures, family heirlooms, etc.) anyway.

In response to Dotty (#2 post), if you can’t find $100 for a years worth of rental insurance, maybe you could consider buying an external hard drive? Or, cheaper still (or possibly free if you don’t exceed a certain size limit), use an online back up solution (i.e. dropbox/amazon/etc.). It would be devastating to lose all your hard work and research.

I hate to post a pitch for a company, but I just want to say that having insurance (both auto & renters) with Amica has been one of the best contributors to my “peace of mind.” I have had several claims with them and they were all handled extremely well — no issues. ever. Just want to give Kudos to a company that is doing it right and encourage those shopping around to take a look at them.

I lost everything to an apartment fire. My brother in law and sister who I was staying with had no renters insurance. All I received was some money from the red cross, local church and family. It was vary hard and unsettling. Never skimp on insurance. From all the help I received about $1500 but lost over $2500 worth of personal items; laptop, ipod, suits, collectible items from Argentina, hard drives(250gb of photos/data), cameras and many new items for the college semester. to top it off the land lord caused the fire with a wood burner that was installed not to code. Protect yourself and get renters insurance!

You should definitely have Renter’s Insurance and be sure that it provides Replacement coverage as opposed to Actual Cash Value (ACV) coverage, otherwise you will not be able to replace the stolen / damaged property as you will get only a fraction of what it originally was worth. Much like the significant depreciation that occurs when you drive your brand new car off the car dealers property.

Such good information. I am going to give my tenants a copy. I already tell them in our agreement that my insurance doesn’t cover them or their belongings and suggest they get renters insurance. Maybe this article will help them decide. Thanks.

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